Shanghai: China's stock regulator has announced detailed guidelines for a planned trial period for margin trading and short selling of stock, bringing the long-awaited market reforms a key step closer to implementation.
The China Securities Regulatory Commission said on Friday that securities brokerages must have had at least 5 billion yuan (Dh2.68 billion) in net capital over the previous six months to participate in the pilot plan, and must use their own funds and securities for the business.
China's State Council, or cabinet, gave the green light two weeks ago for the pilot project but no start date has been set.
The reforms are expected to bolster business for securities brokerages, whose shares surged after the announcement of the State Council's approval.
The reforms are also expected to provide investors with hedging tools, improve market liquidity and spur the development of new products.
Margin trading allows investors to buy shares using borrowed money, and short selling allows investors to sell borrowed stocks in the hope of buying them back later at a lower price, to profit from a price decline. Eleven Chinese brokerages, including sector heavyweight CITIC Securities Company, are vying to participate in the pilot project. China also announced plans earlier this month for stock index futures trade, expected to be launched within three months, as market reform gains momentum.
